Get Back on the Apple Stock Bandwagon

The newest iteration of the iPhone is just around the corner, Apple (AAPL[1]) stock is up more than 20% in the past nine weeks, and Carl Icahn has managed to get an appointment with CEO Tim Cook.

Well, whaddya know … Apple is relevant again.

The question is, can the company remain relevant long enough to turn Apple stock’s current rally into something more permanent?

Investors Can Be Fickle, For Better or Worse

The market can be cruel and confusing sometimes, especially with its highest-profile companies, such as Apple.

After AAPL fell from a September 2012 high of $705 to a low near $390 in June of this year, some observers finally started to acknowledge that owning Apple stock might be painful. One headline read “Time To Give Up On The Stock.”[2] The venerable Jim Cramer finally rated AAPL a “sell” in mid-June when it was trading around $415 per share, after calling it a “buy” in late February when it was priced at $430. The media was all too happy to explain that two key Apple executives had shed $15 million worth of their shares in the second quarter, and how it was a sign of the company’s impending implosion.

In other words, by mid-June, Apple stock was a train wreck. Nine weeks later, it had gained more than 20%, and it still has plenty of gas in the tank.

Score one for whoever said “Be fearful when others are greedy, and be greedy when others are fearful.”

What happened? Truth be told, not much changed. Investors simply decided to start seeing the glass as half-full again rather than half-empty, and once that mentality was put into place, Apple stock took on a self-perpetuating life of its own … one of the quirky characteristics of being the world’s most watched company.

But again, we have to ask: Does AAPL has enough fodder left to keep these buyers interested long enough to turn this into a monster-sized mover?

In a word, yeah.

While the Apple stock buyback isn’t exactly news, it’s not exactly happening yet either. It’s on the long-term radar, however. Apple plans on giving back $100 billion to its investors via stock repurchases and dividends over the next three years. Rumor has it that the buyback is on the Icahn/Cook meeting agenda; the activist investor is expected to push for an even bigger buyback plan.

The big news, of course, is the upcoming launch of a considerably-cheaper iPhone.

The plan has plenty of critics. Some are concerned that a lower-priced smartphone will not only mar Apple’s image, but will crimp already-struggling margins as well. But the new lower-end iPhone will do something quite significant things in Apple’s favor: recapture market share it had been bleeding to Google (GOOG[3]) Android-powered machines.

A lower-cost iPhone also will bring in tens of millions of new consumers to the iTunes site. Apps, services, television and music were never treated like a meaningful profit center by AAPL before, but with a whole new batch of users on the verge of being brought into the Apple circle, the company might be positioning to change that.

Charts Don’t Lie

Still, there’s no way to deny that Apple stock can disconnect itself from the company’s underlying results from time to time. For that reason, it’s as important to get a bead on the chart as well as get a grip on the company’s future.

Incredibly enough, the shape of the chart is actually jiving with AAPL’s current rebound. It also says more upside is in store, though it won’t be without ups and downs.

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The pullback between September 2012 and April of this year was, to put it bluntly, harsh. The end of that pullback was decisive, though; traders turned it into a sideways consolidation range early in the year, and kept it in that range between $390 and $470 for several months. Though not fruitful, that sideways movement still served a purpose — it let the bulls brew up the bullishness they unleashed earlier this month. With the top edge of the range now breached, it’s pretty clear the long-term rebound effort has taken hold. The cross back above the key long-term 100- and 200-day moving averages confirms the idea.

Now might not be the exact best time to dive in, however.

The breakout effort was solid, but perhaps a little overheated. The stock has cooled itself off a tad by peeling off last week’s high near $514 to the current price near $489, but it has a little further to slide before finding a healthy floor.

Still, the heavy lifting has been done … Apple stock is a long-term buy again, even if only because the market just decided it was time for the pendulum to swing in the other direction.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.